Lord Jackson’s review is back on the table but, with referral fees omitted, is the government just cherry picking its favourite bits?

Many parts of the insurance sector received a welcome boost this week when the government promised to treat the proposals of the Jackson Review as a priority. For many, it allayed the fears that Jackson’s year-long review would sit gathering dust after the departure of the last government.

The Ministry of Justice will consult on how to implement some of Jackson’s key recommendations in the Autumn, focusing on conditional fee agreements (CFAs) and the role of contingency fees in litigation. In the review, Jackson proposes abolishing the recoverability of success fees and ATE insurance premiums, both of which would require primary legislation.

“CFAs have played a role in giving access to justice to a range of people,” parliamentary under-secretary of state for justice, Jonathan Djanogly, says. “But high costs under the existing arrangements have now become a serious concern, particularly in clinical negligence cases against the NHS Litigation Authority and in defamation proceedings.”

Still on the radar

Unsurprisingly, many claims directors were quick to voice their approval, and relief, says Groupama’s head of large and complex loss Karl Parr. “Our initial concern that this review might slip down the agenda of the new government appears to have been unfounded and we are pleased that the opportunity to consider various means of reducing excessive transactional costs from the compensation process remains a very live issue.”

This was echoed by Allianz head of technical claims Roy Hebburn. “This sends a very positive signal that the coalition government is firmly behind the case for reform and is serious in its intent to make the law more accessible and less expensive,” he says.

Cherry picking

But some eyebrows were raised at the consultation’s omission of other key proposals in the report including fixed recoverable costs in the fast-track and referral fees (which will be examined by the Legal Services Board). This has led to concerns the government may take a piecemeal approach, disregarding some of the key aspects of the review embraced by insurers.

AXA’s managing director of claims, David Williams, says: “It is really important to see this move as positive and maintain the pressure, particularly on those elements that are outside the consultation, because the last thing we would want would be for a really good piece of work to be hampered by that fact that the Legal Services Board didn’t take the problems caused by referral fees seriously enough.”

President of the Forum of Insurance Lawyers Dan Cutts also warns against a fragmented approach to the reforms. “In my opinion, we need to keep the package together as Jackson set out. There is a lesson in history here. Lord Woolf’s report of 1996 was meant to be a comprehensive code to speed up litigation and make it more cost effective. But it was implemented only in part and then had CFA overlaid on top. This has lead to the unsustainable situation that Jackson has set out to redress,” he says.

Crossing the ‘t’s

Keoghs’ director of market affairs, Steve Thomas, suggests the government may simply be adopting a belt and braces approach, however. “It may be coincidence but the pieces under consultation are the proposals in the review that would require primary legislation. It may be that the government feels that if it is going to have to bring forward primary legislation to change it, they need to be seen as having gone through a formal consultation process,” he explains.

Not all sections of the insurance sector are happy with the pending consultation – legal expenses insurers are up in arms over the potential loss of income caused by scrapping ATE premiums. DAS UK Group chief executive Paul Aspin, a vocal critic of Lord Jackson’s reforms, insists that implementing the reforms could affect claimants’ access to justice.

“We are very concerned about the government’s comments regarding the future of CFAs and in particular the threat that now hangs over the recoverability of success fees and ATE premiums, given that CFA agreements and ATE have together provided a robust solution to the lack of Legal Aid available to genuine claimants.”

Thomas predicts the consultation paper will most likely come out in October so it can also include the recommendations of Lord Young’s Review of Health and Safety Law and the Compensation Culture, due in September. He adds that he expects the government to announce its intentions regarding Lord Jackson’s proposals by April next year.

For a more indepth look at these issues, see the 12 August edition of Insurance Times